Unfunded public pension liabilities are a foreseeable crisis, yet state pension reform is often seen as too difficult to tackle, so mounting unfunded liabilities are ignored. But ignoring the need for public pension reform can be disastrous, resulting in spiraling pension debt, compromised public services, fiscal distress, and threats to the pension security of workers at the state and local levels.
The Pension Integrity Project at Reason Foundation offers pro-bono consulting to public officials and other stakeholders to help them design and implement pension reforms that improve plan solvency and promote retirement security.
We believe that public sector retirement systems should work for all public employees, retired public employees, and taxpayers. Affordable retirement plans with transparent and accountable management are necessary to support all aspects of good governance.
With public pension debt rising in so many places, states, cities, and counties are likely to increasingly struggle to provide public services unless they are able to adopt financially sustainable retirement benefits.
Why do public pension problems go unsolved?
Confusing, Unreliable Data
Public pension data can be overwhelming for many trying to understand the intricacies of how their state’s pension system works.
Pension reform is often further stymied by the lack of reliable numbers. Projections are only as good as the assumptions they’re based on, and often those assumptions are flawed.
Too often, a state retirement system’s own numbers fail to make realistic assumptions regarding pension investment returns, costs, risks, and demographic and economic trends.
Bad Pension Reform Options
Lawmakers can be further frustrated by not seeing the vast array of options for public pension reform available.
Public pension boards and actuaries may present reform plans that are politically unpopular, financially infeasible, and/or insufficient to meet the scale of the problem.
Reluctant Legislators
Even when legislators have reliable numbers and examine their options for pension reform, their colleagues might not agree that there’s a problem at all.
Unless a critical mass of legislators agree that unfunded public pension liabilities are a problem for workers, retirees, taxpayers, and the state, pension reform likely won’t be made a priority.
Resistant Stakeholders
Without a shared understanding of the public pension problem, some stakeholders may be opposed to even talking about pension reform.
Some fear that pension reformers are anti-worker or that retirees and current workers could lose the retirement benefits they’ve already been promised.
What if you could change this dynamic?
- What if you could honor 100% of the public pension benefits earned in a way that fits within the needs of your state budget?
- What if you had data and analysis you could trust from independent actuaries, policy analysts, and researchers who could work through every potential pension reform scenario with you?
- What if you had a broad menu of pension reform options, not just plans based on false assumptions or ideological pre-commitments?
- If you and your colleagues could generate consensus on pension issues, how much farther could you take your reform effort?
- What would pension reform look like with support from stakeholders and members of both political parties?
Education and expertise can make the difference
Reliable, Understandable Data
Reason Foundation’s Pension Integrity Project can help you get a handle on the numbers. Using our actuarial modeling and quantitative analysis, we’ll dissect your public pension problems and validate projections from pension boards or alternatives assembled by stakeholders.
We’ll also provide projections based on the costs, investment returns, and risk assumptions you think are the most reasonable.
Clear Paths Forward
We’ll review all available pension reform options and work with you to find the approach that’s most viable. We never push a single, cookie-cutter approach to public pension reform.
The Pension Integrity Project offers a menu of ideas and options and then works with policymakers and stakeholders to craft custom reforms and policy solutions tailored for their state pension systems and budgets.
Our role is strictly advisory. It’s our job to know if the pension math adds up. It’s your job to add up the votes.
Gain Legislative Support
As we review options together, you’ll gain a firmer understanding of the mechanics behind your government employee pension system.
Your office will become a public pension policy think tank within the legislature. We’ll also work with you to educate your fellow policymakers.
No amount of meetings or presentations is too much. We’ll meet with an entire caucus, testify at committee hearings, and speak with legislators one-on-one.
Whatever it takes to make the public pension reform problem easier to understand so that a vote for reform can be cast with confidence.
Build a Coalition for Reform
Just as with lawmakers, pension reform needs to be understood by stakeholders in order for them to support it.
We’ll meet with stakeholders and demonstrate how pension reform is about long-term stability and keeping retirement promises—a goal everyone can agree on.
We’ll work to educate stakeholders on the options available, discuss the trade-offs involved with each approach, and find the best way to achieve long-term public pension health.
Forge a Long-Term Solution
The result? We’ll help you find a way to pay down state pension liabilities and stabilize your system without hurting taxpayers or sacrificing state services.
Take the next step toward reform
Sign-up below to schedule an initial consultation with our team of public pension reform experts.
We can help you make sense of the data, explore numerous pension reform options, and discuss ways that Reason Foundation can help policymakers and stakeholders in your state.
A Record of Results
But wait…
Aren’t the upfront costs too high?
One of the reasons we have unfunded public pension liabilities today is that we’ve avoided paying the true costs of providing the pension benefits promised to generations of public workers.
This means that sponsoring governments need to find ways of directing additional resources to pension systems in the coming years.
Thankfully, most governments have some flexibility on the timing and method of how that’s achieved. That gives policymakers and stakeholders the opportunity to craft custom solutions to manage the costs while better managing pension debt effectively.
And it’s important to remember the one thing we know for certain: pension math is non-negotiable, and in the long run, the most expensive option is doing nothing.
Would making changes to the pension plan take benefits away from current workers or retirees?
An important guiding principle for all pension reform should be ensuring that 100% of benefits earned and accrued by active workers and retirees are met.
If policymakers consider introducing alternative retirement plans for newly hired workers, those designs can and should be designed so they do not impact active worker or retiree benefits.
Public pension reforms must ensure that legacy unfunded liabilities continue to be paid off as fast, if not faster, than they were otherwise planned to be.
Won’t these plans just slide back into insolvency?
To avoid falling short of the goal of improving pension solvency, it’s important to avoid the temptation of adopting half-measures in the interest of political expediency.
Instead, policymakers should build a holistic, targeted reform—either at once or in multiple phases—that addresses pension funding policy, amortization methods, design vulnerabilities, actuarial and demographic assumptions, and governance.
There’s usually more than one driver of unfunded pension liabilities. Accordingly, pension reforms need to be multifaceted to be most effective.
Reason’s commonsense approach
Unlike other think tanks or policy experts, we’re not committed to a one-size-fits-all solution. Instead, we’re committed to a commonsense set of principles, namely:
- Keeping Promises: Pension reforms should ensure the ability to pay 100% of the benefits earned and accrued by active workers and retirees.
- Retirement Security: Provide retirement security for all current and future public employees in the pension system.
- Predictability: Stabilize contribution rates for the government and workers for the long term.
- Risk Reduction: Reduce the pension system’s exposure to financial risk and market volatility.
- Affordability: Reduce long-term costs for government employers, taxpayers, and public workers.
- Attractive Benefits: Ensure governments have the ability to recruit and retain 21st-century employees.
- Good Governance: Adopt best practices for pension board organization, investment management, and financial reporting.
The Pension Integrity Project understands the pension reform process from all sides of the problem. Members of our team have worked as public employees, served on pension boards, and have been part of past pension reform efforts undertaken with several state legislatures.
We’re booking consultations now
We’re currently scheduling consultations for the 2025 legislative session. Please contact us now to ensure availability.
Take the next step toward reform
Sign-up below to schedule an initial consultation with our team of pension reform experts.
We can help you make sense of the data, explore pension reform options, and discuss ways that Reason Foundation’s Pension Integrity Project can help policymakers and stakeholders in your state.